Taking Another Look at Fair Isaac (FICO)’s Valuation After Its Recent Share Price Rebound

Fair Isaac (FICO) has been quietly grinding higher, with shares up around 3% over the past month and roughly 15% in the past 3 months, even as year-to-date returns remain negative.

See our latest analysis for Fair Isaac.

That recent 15% 3 month share price return looks more like a constructive reset than a dead cat bounce, especially when you set it against the stock’s negative year to date share price performance, but very strong five year total shareholder return.

If FICO’s move has you thinking about what else might be quietly compounding in the background, it could be worth scanning fast growing stocks with high insider ownership for your next idea.

With earnings still growing double digits and the share price lagging this year, FICO’s setup looks intriguing, but after a massive multi year run, is this a fresh entry point or is future growth already priced in?

Most Popular Narrative Narrative: 11.8% Undervalued

With Fair Isaac last closing at $1,792.13 against a narrative fair value of about $2,031.78, the implied upside leans in favor of patient holders.

The ongoing transition to SaaS and cloud-based delivery, evidenced by double-digit growth in FICO Platform ARR and emphasis on conversion to next-generation AI-driven decisioning solutions, is increasing recurring revenues, supporting margin expansion and greater earnings predictability. Sustained investment in explainable AI and machine learning, as showcased by new FICO-focused foundation models and decisioning innovations, is enhancing competitive differentiation and supporting premium product offerings, increasing average selling prices and net margins.

Read the complete narrative.

Want to see what kind of revenue runway and profit profile could justify this higher fair value, plus the future multiple needed to get there? The narrative spells out a detailed earnings path, rising margins, and an ambitious valuation framework that might surprise you. Click through to see exactly how those assumptions stack up.

Result: Fair Value of $2,031.78 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, regulatory shifts in mortgage credit scoring and slower software platform adoption could still pressure FICO’s growth assumptions and challenge that undervaluation narrative.

Find out about the key risks to this Fair Isaac narrative.

Another Valuation Lens: Rich on Earnings

While the narrative fair value suggests upside, a simple earnings lens tells a different story. FICO trades at about 65 times earnings, versus a fair ratio of 38.5 and around 33 for the wider US software space. Peers average roughly 45, so buyers today are paying a hefty premium for growth that still has to be delivered. Is that cushion of optimism thicker than you are comfortable with?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Fair Isaac Narrative

If you are skeptical of this view or simply prefer to dig into the numbers yourself, you can construct a fully personalized narrative in just a few minutes: Do it your way

A great starting point for your Fair Isaac research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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